January 11th, 2022 9:06 AM by Richard Sardella MLO.100007700/NMLS 233568
Yesterday after seven sessions of rate increases, the 10 yr note ended unchanged. MBS prices down 15 bps as the mortgage markets continue to reel over the rapid rate increases. This morning more selling in MBSs at 9:00 am ET down 23 bps while the 10 yr remained unchanged at 1.77%.
No data this morning, markets awaiting Jerome Powell’s confirmation hearing in the Senate Banking Committee (10:00 am). He will have a lot to explain about why the Fed is about to launch one of the biggest monetary policy switches in 20 years. He will be confirmed, has support from both Democrats and Republicans. Markets provided the Fed some support about what the Fed is about to undertake; ending the $120B a month purchasing treasuries and MBSs, increasing the FF rate at least three time possibly beginning in March and starting to consider lessening its $28 trillion balance sheet. Most of the large Wall Street firms have noted they expect the Fed to tighten, Jamie Dimon, JP Morgan Chase said yesterday he expects four rate increases this year; if so, there are seven FOMC meetings this year, so a rate increase is possible at most of those meetings.
At 9:30 am the DJIA opened -10, NASDAQ -31, S&P -3. 10 yr at 9:30 am 1.77% unchanged. FNMA 3.0 coupon 102.45 -20 bps and down 2 bps from 9:30 am yesterday.
The Fed mis-judged inflation outlooks a year ago, believing it would abate once the supply chain recovered; not only has the supply chain not improved but prices have increased at the fastest rate in 40 years. Now the time of reconning is at hand. Tomorrow another look at inflation when Dec CPI data is reported. Expectations are an annual increase of 7.1%. The longer-term outlook for inflation is not as bleak, with the Fed prepared to choke it off with higher interest rates. Economists projecting inflation will slow to less than 3% by the end of 2022. But wages are gaining momentum, especially at the lower end of the pay scale, and could keep rising given the appetite for labor. Economists expected price pressures to have been more contained last year, too.
This afternoon at 1:00 pm Treasury will sell $52B of 3 yr notes, not quite as important for the long end of the curve as tomorrow’s $36B 10 yr note sale.
Any potential for improvement in MBSs won’t happen until this afternoon after Powell finishes his confirmation hearing.
PRICES @ 10:00 AM
10 yr note: 1.77% unch
5 yr note: 1.55% +3 bp
2 Yr note: 0.94% +4 bp
30 yr bond: 2.08% -2 bp
Libor Rates: 1 mo 0.104%; 3 mo 0.238%; 6 mo 0.383%; 1 yr 0.677% (1/10/22)
30 yr FNMA 3.0: @9:30 102.45 -20 bp (-2 bp from 9:30 yesterday)
30 yr FNMA 3.5: @9:30 104.67 -12 bp
30 yr GNMA 3.0: @9:30 102.38 -19 bp
Dollar/Yuan: $6.3749 -$0.0019
Dollar/Yen: 115.57 +0.38 yen
Dollar/Euro: $1.1321 -$0.0007
Dollar Index: 96.01 +0.02
Gold: $1804.20 +$5.50
Bitcoin: 41,673 +172
Crude Oil: $78.95 +$0.72
DJIA: 35,814 -255
NASDAQ: 14,899 -43
S&P 500: 4645 -25
Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.